GBP/USD – Pound Higher as Sentiment Remains Negative on Greenback

The British pound continues to head higher this week. In Thursday’s North American trade, GBP/USD is trading at 1.4067, up 0.48% on the day. On the release front, there are no British events on the schedule. In the US, PPI gained 0.4%, matching the forecast. Core PPI also gained 0.4%, beating the estimate of 0.2%. Both indicators rebounded after declines in the previous month. Unemployment Claims climbed to 230 thousand, just above the estimate of 229 thousand. On Friday, the US releases key housing and consumer confidence numbers. The UK will release Retail Sales.

The pound has posted winning sessions every day this week, and has continued the upward trend on Thursday. GBP/USD has gained 1.7% this week, and punched above the 1.41 line earlier on Thursday. The pound posted strong gains on Wednesday, as US consumer spending reports were weaker than expected. Still, US fundamentals remain solid, as the US economy is showing strong expansion, the labor market remains at capacity, and inflation levels are moving higher. This has led some analysts to attribute the recent sag in the US dollar to technical factors rather than fundamental reasons.

With US inflation indicators pointing higher in January, the Fed will be reevaluating its projection for rate hikes in 2018. Currently, the Fed is planning three hikes this year, but that could change to four, or even five hikes, if inflation continues to head upwards and the robust US economy maintains its strong expansion.  The new head of the Federal Reserve, Jerome Powell, received a rude welcome from the stock markets, as he started his new position last week. Powell sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

GBP/USD Fundamentals

Thursday (February 15)

• 8:30 US PPI. Estimate 0.4%. Actual 0.4%
• 8:30 US Core PPI. Estimate 0.2%. Actual 0.4%
• 8:30 US Empire State Manufacturing Index. Estimate 17.7. Actual 13.1
• 8:30 US Philly Fed Manufacturing Index. Estimate 21.5. Actual 25.8
• 8:30 US Unemployment Claims. Estimate 229K. Actual 230K
• 9:15 US Capacity Utilization Rate. Estimate 78.0%. Actual 77.5%
• 9:15 US Industrial Production. Estimate +0.2%. Actual -0.1%
• 10:00 US NAHB Housing Market Index. Estimate 72. Actual 72
• 10:30 US Natural Gas Storage. Estimate -193B. Actual -194B
• 16:00 US TIC Long-Term Purchases. Estimate 50.3B

Friday (February 16)

• 4:30 British Retail Sales. Estimate 0.5%
• 8:30 US Building Permits. Estimate 1.29M
• 8:30 US Housing Starts. Estimate 1.23M
• 8:30 US Import Prices. Estimate 0.6%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4

*All release times are GMT

*Key events are in bold

GBP/USD for Thursday, February 15, 2018

GBP/USD February 15 at 11:30 EDT

Open: 1.3999 High: 1.4100 Low: 1.3995 Close: 1.4067

GBP/USD Technical

GBP/USD continues to break through resistance levels. On Thursday, GBP/USD inched higher in the Asian session. In European trade, the pair posted considerable gains. GBP/USD edged higher in North American trade but has given up these gains

• 1.4010 is providing support
• 1.4128 is the next line of resistance

Current range: 1.4010 to 1.4128

Further levels in both directions:

• Below: 1.4010, 1.3901, 1.3809 and 1.3744
• Above: 1.4128,, 1.4271 and 1.4345

OANDA’s Open Positions Ratio

GBP/USD ratio is showing gains in long positions. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction GBP/USD will take next.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.